Union Bank makes key changes, strengthens position

• Gears itself for a new phase of growth

Union Bank of Colombo PLC (UBC) stated that 2014 marked a year of change in its 20 year history having received a significant capital infusion of Rs. 11.4 billion from Culture Financial Holdings, an affiliate of TPG, one of the largest private global investment firms. This investment is one of the largest FDIs to Sri Lanka in the recent times. UBC is well positioned for its next phase of growth with the highest Capital Adequacy Ratio of 41.47% in the industry. UBC Director/CEO Indrajit Wickramasinghe stated, “With a solid foundation, supported by financial stability and global expertise, UBC is redesigning itself as a fully fledge commercial bank, and is now geared to focus on a bold new world of opportunities and growth. Subsequent to the TPG investment, the Bank reconstituted its Board of Directors and strengthened its management team and is putting in place the required resources, products, processes and systems needed to focus on its new aspirations. “The successful implementation of a new core banking system brought about significant operational efficiencies and customer service excellence. This new beginning enables us to be even more cognisant to the paradigms ahead of us, powering us to lay the foundation for those changing times ahead; as we focus on achieving the ambitious goals we have set for ourselves.” Highlighting on its performance UBC group which includes UB Finance Company Ltd and National Asset Management Ltd, reported a pre tax profit of Rs. 233 million in comparison to Rs. 148 million during recorded in 2013. Profit after tax of the Group was Rs. 78.2 million for the year ended 31 December 2014. The Bank reported a profit before tax of Rs. 113 million for the year. Profit after tax for the year is Rs. 57 million. The Group reported a 53.2% increase in Net Interest Income (NII) during the year, recording Rs. 1,970 million in comparison to Rs. 1,286 million in 2013. The Bank NII also increased by 52.5% in 2014 amounting to Rs. 1,763 million for the year 2014, compared to Rs. 1,155 million posted last year. The primary reason for this was the reduction of Rs. 764 million in interest expenditure during 2014 due to re-pricing based on the reduction of interest rates and the improvement in the CASA ratio. The Group’s total assets increased by 42.7% to cross the Rs. 50 billion mark to reach Rs. 52,564 million in comparison to Rs. 36,824 million in 2013. This is largely attributed to the capital infusion. The Group has reported a 15.3% growth in loans and advances despite the reduction in the pawning portfolio of the Bank. The Bank’s loans and advances recorded a growth of 10.6% over 2013. Bank’s subsidiary, UB Finance has recorded a commendable growth subsequent to its focus on restructuring itself during the initial few years after the investment. Total liabilities of the group recorded Rs. 4.436 million growth resulting in Rs. 36,067 million as at the year end. The CASA mix increased significantly to 24.9% from 19.2% in 2013. Fee and other income of the group recorded a 5.9% growth to be at Rs. 773 million for the year in comparison to Rs. 730 million in 2013. National Asset Management Ltd reported a significant growth of 55.6% in fee income. This is attributed to the growth in funds under management in 2014 in comparison to 2013. Group’s operating income reported a Rs. 727 million increase, resulting in a 36% growth overall in comparison to 2013. Total operating income of the Group for the year was Rs. 2,743 million compared to Rs. 2,016 million in 2013. The Bank recorded an operating income of Rs. 2,293 million for the year, which was a growth of 29%. Expenses of the Group and the Bank increased by 26% during the year; this increase is attributed to significant strategic investments made with regard to the implementation of a new core banking system and branch network expansion initiatives. Increasing the Bank’s foot print significantly the branch network saw an increase of 70% during the 24 months period leading to December 2014. The Branch network now stands at 61. The strong operating profit of the Group has been impacted by impairment charges of Rs. 526 million during the year. Pawning accounted for a substantial component of the impairment. However, the exposure on pawning now stands at 5% in comparison to 11% at the beginning of the year. A highlighted improvement was recorded in the Bank’s non-performing ratio reaching 7.4% in December 2014 from 11.8% in mid-2014.